Arkema S/Adr

Welcome to Arkema's first quarter 2025 results and outlook conference call. For your information, this call is being recorded. It will take place in a listen-only mode, and you will have the opportunity to ask questions after the presentation by pressing star N1 on your touchtone telephone. I will now hand you over to Thierry Le Henaf. Chairman and Chief Executive Officer. Sir, please go ahead.

Hello, thank you very much. Good morning, everybody. So, welcome to ARCHEMAS Q1 2025 Results Conference Call. Joining me today are Marie-Josée Toncion, our CFO, and the Investor Relations Team. As always, to support this conference call, we have posted a set of slides which are available on our website. I will comment now the highlights of the quarter before letting Marie-Josée go through the financials, and at the end of the presentation, we'll be available to answer your questions as usual. After a challenging macro in 2024 during which Arkema delivered a good performance, the market environment in Q1 2025 remained difficult with volatility and also a lack of visibility, reinforced as you well know, by the ongoing uncertainty around trade tariffs that has driven certain customers, particularly in the U.S., to adopt a wait-and-see attitude. As a result, the demand went globally through across most of our markets in Europe and the U.S. in the first quarter, while Asia remains solid with significant growth. Note that there were some exceptions in the market, with well-oriented markets like electronics, which again supported PM's significant development. In this context, Arkema results end up well with EBITDA slightly down at 329 million euros for the quarter. Our specialty materials, which represent 93% of our total sales and which are the core of Arkema's strategy, showed a good resilience with EBITDA close to last year level with a 3% decline, supported by the strong growth of high-performance polymers following on from the positive momentum of last year. On the opposite side, intermediates, which is 7% of our sales, decreased significantly due to refreshing gases that are expected to stay weak in the second quarter before they start to improve. Looking briefly at the performance of our three specialty material segments. In the adhesive segment, our ongoing work on efficiency, our strict control of operation, as well as our continuous dynamic price management enabled us to mitigate the weak demand environment in industrial adhesives in Europe and North America while the construction business was rather stable. Besides, Bostik benefited from the integration of dose-eliminating adhesive, which is starting well, I'm pleased to say. In advanced materials, our EPIDAR was strongly up by 7% thanks to the good momentum in high-performance polymers, especially in Asia. The dynamic of new business developments, notably in batteries, electronic and sports, drove the significant volume growth and was supported by the plant expansions. Moreover, I wanted to highlight Piam, whose EBITDA increased by more than 70% in Q1, supported notably by the rising demand for ultra-thin PEI films for smartphones, one of their latest innovations. Lastly, in coating solutions, market conditions remain at a low level in extreme acrylics, impacting the performance of the signals. I believe this Q1 reserve positions us well among the industry and concerns the resilience of our portfolio of high value-added technologies and specialty materials that we have built over the past years. The group continues to implement with a high level of execution its major project, which will support the growth of the company in the future. As mentioned already, we have made good progress in integrating the teams of DAO and already put in place a whole set of initiatives to restore their market position and improve the performance of this activity with procurement and cost optimization. This is really an exciting project where Arkema can make a difference since our additive businesses are very complementary. We can now propose a full set of technology for flexible packaging to our customers, and this should position us as a key player in the market. We are happy to confirm our expectation of significant development and synergies over the next five years. On the organic project front, we are progressing well with the wrap-up of the 1233ZD unit in the U.S. This new generation of fuel specialties with low emissive impact used for energy efficiency of buildings is already contributing nicely to our results. In addition, our DMDS capacity in the U.S. should wrap up from mid-year as well as the expansion of our organic peroxide in China. Besides, I'm very happy to confirm that our Greenfield polyimide 11 plant in Singapore is now running pretty well from a technical standpoint and should start to exceed break-even around the summer. Finally, as already announced in Feb, we'll shortly start to work on our new capacity in the U.S. for PVDL, scheduled to be completed mid-2026. This represents a high-return project with a limited investment of 20 million US dollars, which will enable us to follow market development and answer the increasing demand for locally manufactured PVDF, notably in semiconductor, cable markets, and energy storage systems. I also wanted to come back quickly on the long-term agreements we recently signed with ENGIE for the supply of biomethane for Bostik in France. This means that approximately 85% of the gas consumption needed to run our Bostik operation in France will come from a renewable source. This follows the agreement we already signed last year, also with ENGIE, for advanced materials, and both will contribute to reduce our CO2 scope, one, emission in line with our climate plan objective. I will now hand it over to Marie-José for a more in-depth look at the financials before we discuss the review at the end of the presentation, and we exchange around your questions.

Thank you, Thierry, and good morning, everyone. So let's start with Arkema's revenues. At 2.4 billion euros, the Q1 sales were up 1.7% year-on-year, supported by a 1.9% positive scope effect, corresponding mainly to the 51 million euro sales contribution of those illuminating adhesives. Volumes came out broadly stable year-on-year, supported by Asia, and driven by the continued progression of high-performance polymers in advanced materials. This performance was achieved in the context of an overall weak demand environment in many markets in Europe and North America. The price effect was limited to minus 0.5%, reflecting the globally stable raw materials environment. Q1 EBITDA came in at €329 million, 6% below last year. Main items are the intermediate EBITDA, which was down nearly 40% year-on-year at €24 million, essentially impacted by the significant decrease in refrigerant gases due to the implementation of new quotas in Europe, as well as lower prices in the US. Acrylics in China allowed to offset partly this effect, thanks to good momentum and volume at the start of the year. On the other hand, specialty materials were very resilient, with an EBITDA at 331 million euros, 3% below Q1 last year. When looking at the different segments, Adhesive solutions achieved EBITDA of close to €100 million. It was impacted by the lower volumes mainly in industrial adhesives, while construction remained at a low level but was supported by our dynamic pricing management and strict control of operations. The EBITDA margin reached 13.8%, which takes into account nearly 50 basis points of dilutive effects related to the consolidation of dowels laminating adhesives. Advanced materials EBITDA increased significantly at 174 million euros thanks to a solid growth in high-performance polymers, benefiting from the growing contribution of PI, advanced materials, the positive momentum in fluoro specialties, and the progressive contribution of new projects. Performance additives held up well in a weak environment, and all in all, advanced materials EBITDA margin improved 100 basis points to 19.5%. EBITDA and coating solutions came in at 58 million euros, reflecting low cycle conditions in the upstream, as well as lower volumes in the downstream activities. Depreciation and amortization stood at 169 million euros and included the amortization of the new production units, which started up during 2024, leading to a recurring EBIT of 160 million euros and a EBIT margin of 6.7%. Non-recurring items amounted to 58 million euros, including 36 million euros of PPA amortization, and 22 million of one-off charges, notably the reorganization costs at our journey site in France, and some restructuring and integration costs at Borsig. Financial expenses stood at minus 24 million euros, reflecting the lower interest on invested cash. Tax expenses at 22.5% of rebate are consistent with the last year's level. And consequently, the Q1 adjusted net income stood at 99 million euros, which corresponds to 1.31 euros per share. Moving on to cash flow, Q1 recurring cash flow amounted to minus 138 million euros, which included the first quarter working capital seasonality, The working capital ratio on annualized sales stands at 17.4%, slightly up year-on-year, including a negative change in fixed assets payables. This is clearly mechanically linked to the reduction in capex in the first quarter this year compared to the end of last year, which was at a peak level in a capex commitment. Local capital expenditure amounted to 89 million euros in the quarter. In line with our guidance, our annual cap extends around 650 million euros for the full year 2025. Net debt on hybrid bonds at the end of March 25, therefore amounted to just over 3.4 billion euros. The net debt to last 12 months EBITDA ratio stands at around 2.3 times. This concludes my comments. Thank you for your attention. I will now hand it over to Kerry for the outlook.